Your firm operates in a market of 200,000 people. By your estimates, you need an install base (people that are willing to use your product after trial) of approximately 40,000 people. Historically, you know that 40% of the people that try your product become regular users. After speaking with some advertising executives, they explain that it takes roughly 10 advertisements on local television stations to get 60% of the viewers to try a product they see on television in this market. These same executives have quoted a Cost Per Point (CPP) of $100,

Your firm operates in a market of 200,000 people. By your estimates, you need an install base (people that are willing to use your product after trial) of approximately 40,000 people. Historically, you know that 40% of the people that try your product become regular users. After speaking with some advertising executives, they explain that it takes roughly 10 advertisements on local television stations to get 60% of the viewers to try a product they see on television in this market. These same executives have quoted a Cost Per Point (CPP) of $100,

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter17: Making Decisions With Uncertainty

Section: Chapter Questions

Problem 10MC: You are considering entry into a market in which there is currently only one producer (incumbent)....

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